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Jason Schwarz authors the popular Economic Timing investment newsletter. His fundamental and technical research has become a primary resource for hedge funds and individual investors. 

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  • Should You Be Stressed About The Banks? 0 comments
    Apr 22, 2009 2:36 PM | about stocks: BAC, SKF, WFC

     The answer is yes. The time to get back in the banks will be after the threat of tangible common equity dilution has been resolved. If i was forced to own a financial today it would be Citi because their dilution is already priced in, but I would much rather be in cash or the SKF ahead of these stress test announcements. Way too much uncertainty. My bet is that all banks will need to have tangible common equity above 3% based on worst case scenarios. Bank of America is currently at 3.13% and Wells Fargo is at 3.1% as compared to JP Morgan's 7.2%. If the Fed's decide to adjust these numbers for a deeper recession that factors in 10% unemployment and corresponding mortgage/credit defaults, we've got dilution on the horizon. I am surprised at how well these stocks are holding up. I guess Geithner soothed everyone, he sure didn't ease my concerns.

    Stocks: BAC, SKF, WFC
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